What is Retirement?
Retirement is a stage in life when a person decides to leave the labour force and live off of sources of income or savings that do not require active work. The age at which a person retires, their lifestyle during retirement, and how they fund that lifestyle will differ from person to person, depending on personal preferences and financial planning.
The standard retirement age is 65, but everyone must decide when and if they will stop working for themselves. You can retire when you have sources of income that do not require you to work and can support your desired lifestyle. There are numerous ways to fund your retirement, including common government-based sources, as well as numerous rules and guidelines to keep in mind when planning for your "golden years."
How much does retirement cost?
There is no single dollar amount that will suffice for everyone's retirement. The age at which you plan to retire, your life expectancy (or the number of years you'll need to fund), and your projected cost of living during that time will all play a role in how much money you'll need to fund your own retirement. This necessitates a personal financial evaluation.
To achieve retirement, you must plan ahead of time and save appropriately. It is best to begin saving when you are young (in your 20s or 30s) and set aside at least 10% of your annual income. If you start saving later in life (in your 40s and 50s), you'll have to save a larger percentage of your income—up to 50% per year.
How to save for retirement?
You can save money in a variety of ways. Here are just a few examples:
- A 401(k) plan is a type of employer-sponsored retirement account (k)
- A pension or 457 plan is a government-sponsored or public-employee-sponsored fund.
- Individual Retirement Account (IRA) Annuities, whether traditional or Roth IRA Annuities, and 403(b) Plans
- SEP plans
- Non-retirement-related investment vehicles
Many of these and other types of retirement accounts include benefits such as employer-matching programmes or tax-advantaged treatment. The idea behind putting money aside to save for retirement is that you can take advantage of the specific benefits that each account provides, as well as the time value of money, to earn interest on your contributions, allowing you to grow your earnings over time. The earlier you begin to save, the greater your benefit.
What are the alternatives to retirement?
While spending your golden years travelling the world or settling into a comfortable relaxed lifestyle without the need to work may sound appealing, these retirement models are not for everyone. Indeed, retirement may not be for everyone, whether due to financial constraints or a desire to continue working.
One option is to consider part-time retirement, in which you find work that you enjoy, even if the pay is lower. Ideally, this work pays enough to cover your living expenses while also giving your retirement funds time to grow before you need to use them for income.